Question 1

Apply the retail method to the following company information to calculate the cost of the ending inventory for the current period.

Accepted Answer

The answer of Apply the retail method to the following...

Question 2

A company sells a climbing kit and uses the periodic inventory system to account for its merchandise. The beginning balance of the inventory and its transactions during January were as follows:   If the ending inventory is reported at $357, what inventory method was used?

Accepted Answer

A)  LIFO. 
B)  FIFO. 
C)  Weighted average. 
D)  Specific identification. 
E)  Retail inventory methoD. 
A)  LIFO. 
B)  FIFO. 
C)  Weighted average. 
D)  Specific identification. 
E)  Retail inventory methoD.

Question 3

If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.

Accepted Answer

A) True 
 B)False

Question 4

During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:

Accepted Answer

A)  Specific identification method. 
B)  Average cost method. 
C)  Weighted-average method. 
D)  FIFO method. 
E)  LIFO method. 
A)  Specific identification method. 
B)  Average cost method. 
C)  Weighted-average method. 
D)  FIFO method. 
E)  LIFO method.

Question 5

A company reported the following data:   Required:
1. Calculate the days' sales in inventory for each year.
2. Comment on the trend in inventory management.

Accepted Answer

The answer of A company reported the following data: ...

Question 6

An advantage of the weighted average inventory method is that it tends to smooth out erratic changes in costs.

Accepted Answer

A) True 
 B)False

Question 7

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the highest gross profit and net income.

Accepted Answer

First in,

Question 8

Under LIFO, the most recent costs are assigned to ending inventory.

Accepted Answer

A) True 
 B)False

Question 9

In applying the lower of cost or market method to inventory valuation, market is defined as the current selling price.

Accepted Answer

A) True 
 B)False

Question 10

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

Accepted Answer

A) True 
 B)False

Question 11

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?

Accepted Answer

A)  $120. 
B)  $124. 
C)  $128. 
D)  $130. 
E)  $140. 
A)  $120. 
B)  $124. 
C)  $128. 
D)  $130. 
E)  $140.

Question 12

Incidental costs often added to the costs of inventory include import duties, freight, storage, and insurance.

Accepted Answer

A) True 
 B)False

Question 13

Evaluate each inventory error separately and determine whether it overstates or understates cost of goods sold and net income.

Accepted Answer

The answer of Evaluate each inventory error separately and determine...

Question 14

Monitor Company uses the LIFO method for valuing its ending inventory. The following financial statement information is available for its first year of operation:   Monitor's ending inventory using the LIFO method was $8,200. Monitor's accountant determined that had the company used FIFO, the ending inventory would have been $8,500.
a. Determine what the income before taxes would have been, had Monitor used the FIFO method of inventory valuation instead of LIFO.
b. What would be the difference in income taxes between LIFO and FIFO, assuming a 30% tax rate?
c. If Monitor wanted to lower the amount of income taxes to be paid, which method would it choose?

Accepted Answer

The answer of Monitor Company uses the LIFO method for...

Question 15

An error in the period-end inventory balance will cause an error in the calculation of cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 16

When taking a physical count of inventory, the use of prenumbered inventory tickets is an application of internal control.

Accepted Answer

A) True 
 B)False

Question 17

Interim statements:

Accepted Answer

A)  Are required by the Congress. 
B)  Are necessary to achieve full disclosure about a business's operations. 
C)  Are usually monthly or quarterly statements prepared for periods of less than one year. 
D)  Require the use of the perpetual method for inventories. 
E)  Cannot be prepared if the company follows the conservatism principle. 
A)  Are required by the Congress. 
B)  Are necessary to achieve full disclosure about a business's operations. 
C)  Are usually monthly or quarterly statements prepared for periods of less than one year. 
D)  Require the use of the perpetual method for inventories. 
E)  Cannot be prepared if the company follows the conservatism principle.

Question 18

For Randy Hetrick of Fitness Anywhere, the major challenge was maintaining appropriate levels of inventories while controlling costs. What is meant by this statement?

Accepted Answer

Any entrepreneur who sells inventory mus

Question 19

Gotham Company reported a December 31 ending inventory balance of $412,000. The following additional information is also available: The ending inventory balance of $412,000 included $72,000 of consigned inventory for which Gotham was the consignor.
The ending inventory balance of $412,000 included $22,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year.
The ending inventory balance of $412,000 did not include goods costing $48,000 that were purchased by Gotham on December 28 and shipped FOB destination on that date. Gotham did not receive the goods until January 2 of the following year.
The ending inventory balance of $412,000 included damaged goods at their original cost of $38,000. The net realizable value of the damaged goods was $10,000.
The ending inventory balance of $412,000 included $43,000 of consigned inventory for which Gotham was the consignee.
Based on this information, the correct balance for ending inventory on December 31 is:

Accepted Answer

A)  $247,000 
B)  $341,000 
C)  $362,000 
D)  $309,000 
E)  $319,000 
A)  $247,000 
B)  $341,000 
C)  $362,000 
D)  $309,000 
E)  $319,000

Question 20

A company had inventory of 10 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 22 units for $54 each. Using the FIFO perpetual inventory method, what was the cost of the 22 units sold?

Accepted Answer

A)  $470. 
B)  $490. 
C)  $450. 
D)  $570. 
E)  $520. 
A)  $470. 
B)  $490. 
C)  $450. 
D)  $570. 
E)  $520.

Exam 6: Inventories and Cost of Sales

Apply the retail method to the following company information to calculate the cost of the ending inventory for the current period.

A company sells a climbing kit and uses the periodic inventory system to account for its merchandise. The beginning balance of the inventory and its transactions during January were as follows: If the ending inventory is reported at $357, what inventory method was used?

If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.

During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:

A company reported the following data: Required: 1. Calculate the days' sales in inventory for each year. 2. Comment on the trend in inventory management.

An advantage of the weighted average inventory method is that it tends to smooth out erratic changes in costs.

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the highest gross profit and net income.

Under LIFO, the most recent costs are assigned to ending inventory.

In applying the lower of cost or market method to inventory valuation, market is defined as the current selling price.

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?

Incidental costs often added to the costs of inventory include import duties, freight, storage, and insurance.

Evaluate each inventory error separately and determine whether it overstates or understates cost of goods sold and net income.

An error in the period-end inventory balance will cause an error in the calculation of cost of goods sold.

When taking a physical count of inventory, the use of prenumbered inventory tickets is an application of internal control.

Interim statements:

For Randy Hetrick of Fitness Anywhere, the major challenge was maintaining appropriate levels of inventories while controlling costs. What is meant by this statement?

A company had inventory of 10 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 22 units for $54 each. Using the FIFO perpetual inventory method, what was the cost of the 22 units sold?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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